Socio-Economic Research Centre: Indicators show Malaysia’s economy bottomed out though uneven across sectors

KUALA LUMPUR, Jan 4 — The Socio-Economic Research Centre (SERC) executive director Lee Heng Guie has today said key economic indicators including gross exports, industrial output, wholesale and retail trade sales, banks’ loan demand, etc, showed that the economy has bottomed out, albeit unevenly across the sectors.

According to Lee, he said SERC found that Malaysia’s Leading Index (LI) has returned to positive growth territory for the second consecutive month in October 2021 and remained positive over the long-term trend, anticipating a more promising outlook in the near-term (four to six months ahead) if a gradual normalcy of economic activities persists.

SERC also found that the Industrial Production Index (IPI) advanced by 5.5 per cent y-o-y in October 2021 and 2.5 per cent in September after two straight months of contraction, supported by the strong return in manufacturing sector, especially export-oriented industries.

“Domestic-oriented industries continued to perform unevenly while the mining sector remained a drag,” he said.

For the wholesale and retail trade, these made a comeback in October 2021 given nearly full reopening of economic and social sectors, he said.

Lee added that according to Malaysia Institute of Economic Research’s (MIER) Consumer Sentiments Index (CSI) also registered 101.7 points in its latest survey in the third quarter, marking the first time returning above optimism threshold since the third quarter of 2018.

“Gross exports continued its strength throughout the first eleven months of 2021, printing a cumulative 25.7 per cent y-o-y growth,” he said.

According to SERC’s findings, exports of electrical and electronic products remained the largest component (36.4 per cent of total), recorded a 16.1 per cent growth and among other significant contributors were manufactures of metal (+72.5 per cent), rubber products (+57.7 per cent), petroleum products (+57.4 per cent), palm oil and palm-based products (+45.8 per cent), chemical and chemical products (+39.6 per cent), and machinery, equipment and parts (+24.5 per cent),” he said.

SERC also learned that the unemployment rate also saw improvement, where there was an increase to 4.3 per cent (equivalent to 705,000 unemployed persons) in October 2021, its best level since March 2020, but still relatively higher compared to about 3.3 per cent (about 520,000 unemployed persons) before the pandemic, Lee said.

“The headline ‘jobless rate is improving’, pointed to time-related underemployment (those who were employed less than 30 hours per week due to the nature of their work or because of insufficient work and were able and willing to accept additional hours of work) has increased to 2.1 per cent in the third quarter of 2021 compared to 1.1 per cent in the fourth quarter of 2019.

“Skill-related underemployment (those with tertiary education and working in the semi-skilled and low-skilled occupations) also increased to 37.7 per cent (vs. 34.8 per cent) in the corresponding period,” he said.

Also an economic indicator, banking system’s loan growth has picked up for three months in a row to 4.3 per cent y-o-y in November 2021, supported by higher disbursement though repayment has also been gradually increasing.

“Household loans have expanded as a result of higher disbursement across nearly all purposes while increasing business loan was supported by higher demand of working capital.

“Inflationary pressures are building up. Headline inflation, as measured by the Consumer Price Index has consistently climbed higher to 3.3 per cent in November 2021, marking four months of continuous rise from 2.0 per cent in August.

“Besides continued double-digit increases in transport prices, food prices and non-alcoholic beverages have climbed higher (2.7 per cent in November 2021, highest since March 2018),” he said.

He added that among the significant increases in food prices were fresh meat and fish, eggs, oils, and fresh vegetables. Prices for financial services, housing, water, electricity, gas and other fuels as well as furniture and furnishings also increased substantially.

“Overall, we estimate inflation to increase by 3.0 per cent in 2022, higher compared to an estimated 2.5 per cent in 2021,” said Lee.

The Producer Price Index (PPI) has continuously increased for 10 straight months with eight months of double-digit growth in November 2021.

He pointed out that the main increases came from crude materials for further processing (33.4 per cent y-o-y in November; 31.2 per cent in January to November 2021) as well as intermediate materials, supplies and components (12.1 per cent in November; 7.6 per cent in January to November 2021).

“Given rising cost of raw materials and persistent supply disruptions, the increase in PPI is likely to continue in 2022, at least in the first half-year.

“The cost pass-through effect exerts upward pressure on consumer inflation,” he said.

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